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eMarketer: Facebook and Google's Grip on Digital Ad Market Slipping

Rivals are making progress chipping away at their combined dominance.

Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) subsidiary Google and dominant social network Facebook (NASDAQ:FB) have long had much of the digital ad market on lockdown, overshadowing smaller rivals. However, those rivals are expected to start finally chipping away at that duopoly for the first time, although one of the competitors isn't exactly small: Amazon.com (NASDAQ:AMZN).

Google remains the top dog in digital advertising, but its market share is declining. Image source: Google.

Chipping away at the duopoly

eMarketer released fresh estimates today that predict how Google's and Facebook's combined share of digital ad spending is expected to play out in the years ahead.

Year

Google

Facebook

Combined

2016

40.8%

17.1%

57.9%

2017

38.6%

19.9%

58.5%

2018*

37.2%

19.6%

56.8%

2019*

36.2%

19.2%

55.4%

2020*

36.3%

19.3%

55.6%

Data source: eMarketer. *Estimates.

The ad market researcher notes that the two companies are also grabbing a smaller share of new ad spending, forecast at 48% this year. That's far below the 73% of new ad spending that Google and Facebook collectively garnered in 2016.

While Facebook's core service has mostly matured in the important North American market -- daily active users (DAUs) declined modestly for the first time ever last quarter -- its Instagram service is "rapidly" growing its advertiser base, according to eMarketer. That will make the photo/video sharing service an even more important growth driver, bringing in an estimated $5.5 billion in ad revenue this year.

Amazon continues to make steady progress in growing its ad business, with eMarketer forecasting 63.5% growth in U.S. ad revenue this year. The company might be able to break $2 billion in ad revenue for the first time, which would be enough to grab a modest 2.7% share of the U.S. ad market. That might not sound like a meaningful piece of the market, but keep in mind that Amazon is a fierce rival that plays the long game, and Google considers the company its primary competitor.

On the fourth-quarter earnings call last month, Amazon CFO Brian Olsavsky noted, "Advertising was also a key contributor [to profitability] as we're continuing to make the offerings more valuable, both to customers and advertisers alike."

Author

Evan is a Senior Technology Specialist at The Motley Fool. He was previously a Senior Trading Specialist at Charles Schwab, and worked briefly at Tesla. Evan graduated from the University of Texas at Austin, and is a CFA charterholder.